Economic freedom of the world

This report uses 42 distinct variables to create an index ranking of countries around the world based on policies that encourage economic freedom, and places Australia at number 10.

Executive summary

The index published in Economic Freedom of the World measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of privately owned property. Forty-two variables are used to construct a summary index and to measure the degree of economic freedom in five broad areas:

1 Size of Government;

2 Legal System and Property Rights;

3 Sound Money;

4 Freedom to Trade Internationally;

5 Regulation.

Since our first publication in 1996, numerous studies have used the data published in Economic Freedom of the World to examine the impact of economic freedom on investment, economic growth, income levels, and poverty rates. Virtually without exception, these studies have found that countries with institutions and policies more consistent with economic freedom have higher investment rates, more rapid economic growth, higher income levels, and a more rapid reduction in poverty rates.

The EFW index now covers 152 countries and territories. Data are available for approximately 100 nations and territories back to 1980, and many back to 1970.3 This data set makes it possible for scholars to analyze the impact of both cross-country differences in economic freedom and changes in that freedom across a threedecade time frame.